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Developer Bankruptcies Leave Hole in the Property Sector

The bankruptcies of several high profile developers will change the way the sector operates in New Zealand, one of the few developers left standing says.

Tim Manning, who is currently involved in a village for over-35s in Avondale, told NBR it would be difficult to replace the experience of bankrupt developers such as Andrew Krukzlener and Dave Henderson.

“I think it’s a major shame because the reality is these boys were quite good and they created developments and they came up with ideas. Some of them have over 20 years in the business and you just don’t replace that easily”

He said new property developers were unlikely to be able to fill the void because they “tend to make a lot of mistakes in the first few years.”

The property market is “going to be tough over the next few years” Manning said.

There are problems on both the supply and demand sides of the industry, he said.

“The problems are that on the supply side there’s a lack of competent developers, and there’s a lack of funders who want to fund them. There are no finance companies doing much and no banks doing much.”

With the finance companies out of the picture and banks cautious, much of the funding is coming from private backers, he said.

It’s all private money at the moment – smart private people are putting their money in there. It’s actually a very good time to be a lender.”

Mr Manning said the developers that are left are to be “very busy” and he said institutions like listed property trusts would also play a bigger role in future developments, as they do in Australia.

He criticised receivers, liquidators, and bakes for “over-reacting” and questioned the public benefit of having someone like Mr Krukziener bankrupt.

“What is the point of putting a guy like that out of action for three years or probably even five or six years before the banks will fund him again?”

“The guy is out of circulation. He produced some lovely stuff and everyone needs these people”

Mr Manning also criticised the IRD, which has been behind a number of prominent developer bankruptcies, for its tough pursuit of these developers.

“I think they have to take a softer stance. We want to teach these guys a lesson but, at the end of the day if you owed that money you would do a deal because these guys have the propensity to earn that back.”

He said in the near future there would probably be fewer large developments like the Sentinel and the Metropolis and more small projects with 50-60 units rather than 300-400.